Commentary: Gov. LePage should have been more diligent in vetting Cate Street

In September of last year, according to official minutes, Gov. LePage did something that he hadn’t done before and hasn’t done since: He attended and spoke before a meeting of the board of the Finance Authority of Maine.

LePage was there to support Cate Street Capital’s application to the financial aid agency for a $25 million loan backed by the moral obligation of the state (if they defaulted, taxpayers would be left holding the bag) to build a torrefied wood pellet manufacturing facility through its subsidiary Thermogen Industries at the site of the shuttered paper mill in Millinocket.

“Investment capital goes where it is welcomed and stays where it is appreciated,” the notes record LePage saying at the meeting. “There is no better way to show your appreciation than by becoming their partner.”

After LePage’s urging, by an 8-5 vote, the FAME board approved the loan. It would bring the total state subsidies for Cate Street through tax credits and loans to $142 million, according to a contemporary analysis by the Bangor Daily News. That works out to almost $500,000 for each of the 293 jobs that the company promised it would directly create.

MASSIVE PUBLIC HANDOUTS

These massive public handouts to a private company were made possible in part by special legislation passed unanimously by the Maine Legislature in 2013 to allow Cate Street to exceed previous limits on receiving refundable “New Market” tax credits from the state.

But things haven’t worked out quite as LePage, the Legislature or the residents of the Millinocket area had hoped. The plans for torrefied pellet manufacturing never quite gelled, and last month, it was made public that two major investors have pulled out of the Thermogen project.

Cate Street continues to miss payments owed on back taxes to the town of Millinocket and has similar obligations to local vendors and the Internal Revenue Service.

This week, more than 200 employees of the East Millinocket mill (which Cate Street had re-opened in 2011 under the Great Northern Paper brand) received a required notice under the Worker Adjustment and Retraining Notification Act that their temporary layoffs in February will likely be permanent. It now seems clear that Maine will not be seeing the hoped-for returns on its investments, either in immediate jobs or in a renewed wood products industry.

Politicians, including LePage, can be forgiven for hoping that Cate Street could offer a solution to one of Maine’s most difficult and pressing economic problems – the plight of rural towns who have relied on the collapsing paper industry – but they should have been more diligent in vetting the company and its claims. Skepticism is most needed when someone is telling you exactly what you want to hear.

WARNING SIGNS

It’s not like there weren’t warning signs. During the same meeting at which LePage spoke, FAME staff recommended against the $25 million loan.

They noted that the technology was “untried and untested,” that there were “no firm contracts for product sales” and, despite having already received $40 million in tax credits from the state, the project “does not meet the credit worthiness requirement and lacks the strong likelihood of repayment.”

Others have expressed similar, negative assessments.

In May, The Reel Time Report, a paper industry newsletter, published an article castigating Cate Street for its actions in Maine, asserting that they have “generally behaved like a company that had no clue what it was doing” and implying that they may have engaged in fraud. (Cate Street is currently suing the author of that piece for defamation.)

One of the most vocal critics has been independent gubernatorial candidate Eliot Cutler.

“Maybe Paul LePage doesn’t want to talk about why he drove Statoil and a $2.5 billion investment out of Maine yet welcomed to our state a group of snake oil salesmen who have taken taxpayers’ money and left the people of Millinocket and East Millinocket holding the bag,” he said at a recent news conference at which he attacked the governor for ducking debates.

CAMPAIGN CONTRIBUTIONS

LePage, who prides himself on his business acumen and delights in scrutinizing every dollar of spending on food stamps, might have had another reason for not fully vetting this corporate welfare: Cate Street has given heavily to LePage’s re-election campaign. The company, its corporate officers and their families have contributed at least $7,500 to LePage, $4,500 of which came in the two months after his FAME testimony.

They may not be paying their taxes or their workers, but it looks like Cate Street has paid some of its debts.

Mike Tipping is a political junkie who blogs at MainePolitics.net and works for the Maine People’s Resource Center. He can be contacted at:

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